KUALA LUMPUR (Dec 27): TA Securities Research has valued ACE Market-bound electronics manufacturing services (EMS) provider NationGate Holdings Bhd at 70 sen a share, on the back of the company’s expansion plans, as well as strong growth in the electrical and electronics industry.
TA Securities, which does not have a rating for the stock, said the stock’s value is also based on the consideration of the group’s established track record attested to by its long-term strategic business relationships with multinational corporations.
The research house’s target price of 70 sen is 84.21% higher than the company’s issue price of 38 sen apiece.
Based on its enlarged share capital and issue price, NationGate is expected to have a market capitalisation of RM788.1 million after its debut on Jan 12, 2023, making it the largest listing on the ACE Market of Bursa Malaysia. It is seeking to raise RM165.5 million in the initial public offering (IPO), with the bulk of the proceeds used to repay bank borrowings.
Going forward, TA Securities has projected that the EMS provider’s revenue would grow at a three-year compound annual growth rate of 10.8% to RM1.04 billion, and its core earnings by 22.3% to RM104.9 million, for financial year 2024 (FY2024).
The research house expects growth to be driven by increased orders from its major customers within the networking and telecommunications and industrial instruments industry.
“In addition, we also expect the group to capture new opportunities via its expansion plans, coupled with rising adoption of electrical content within traditional and non-traditional end-user markets, such as automotive and consumer electronics. Meanwhile, near-term visibility is also supported by NationGate’s unbilled purchase orders of RM369.6 million as at Nov 14,” it said in a note to clients.
As at end-June, NationGate's net debt stood at RM234 million, with a gearing of 1.6 times. On a pro forma basis, TA Securities said fresh proceeds of RM165.5 million from the IPO are expected to see the group’s gearing narrow to 0.5 times.
NationGate currently does not have any formal dividend policy.
“As we assume a dividend payout of 20% across FY2022-24, we forecast forward yields at 1.9%, 2.2%, and then 2.7%,” the research house added.